IFRS 18 replaces IAS 1 for annual periods beginning on or after 1 January 2027. It changes presentation and disclosure, not measurement. A company whose first IFRS period starts on or after that date applies it throughout, and adjusted profit measures in its equity story can become audited disclosures.
That matters most to a company heading for a Main Market listing or a sale into an IFRS-reporting group. Measures such as adjusted EBITDA, or operating profit before amortisation of acquired intangibles, are exactly what the new standard asks it to define, reconcile and explain.
IFRS 18 Presentation and Disclosure in Financial Statements was issued by the IASB on 9 April 2024 and replaces IAS 1. It is effective for annual reporting periods beginning on or after 1 January 2027; earlier application is permitted and is disclosed.
The standard does not change how items are recognised or measured. Amortisation and impairment are calculated as before; what changes is where they appear, how profit is subtotalled, and how a company explains the adjusted measures it uses outside the financial statements.
IFRS 18 is the IASB's standard on presentation and disclosure in financial statements. It replaces IAS 1, requires defined subtotals in the statement of profit or loss, and requires management-defined performance measures to be disclosed in the notes.
For a first-time adopter, the company presenting its first IFRS financial statements, IFRS 18 is not a change from IAS 1. It is simply the presentation standard its first IFRS accounts are built on.
The UK Endorsement Board adopted IFRS 18 for use in the UK on 10 December 2025, so it forms part of the UK-adopted IFRS that a company moving to IFRS will apply.
Our guide to FRS 102 for AIM companies covers the AIM position, and the FRS 102 vs IFRS comparison sets out how the two frameworks differ.
The timing comes from IFRS 1. Under IFRS 1 first-time adoption, a company applies the IFRSs effective at the end of its first IFRS reporting period to every period presented. A company whose first IFRS reporting period begins on or after 1 January 2027 therefore presents its first IFRS statements, comparatives included, under IFRS 18 from the outset.
A company whose first IFRS reporting period begins before 1 January 2027 and uses IAS 1 will face a second presentation change a year later. Early application of IFRS 18 is worth considering, so the presentation changes once.
Existing IFRS reporters transition differently: they give a line-by-line reconciliation of the comparative year's profit or loss between the IFRS 18 amounts and those previously presented under IAS 1. That reconciliation is written for companies that previously presented under IAS 1; a first-time adopter explains its move from previous GAAP under IFRS 1.
IFRS 18 classifies income and expenses into five categories: operating, investing, financing, income taxes and discontinued operations. The operating category is the residual, default category. Amortisation and impairment of intangible assets used in the business therefore normally sit in the operating category, alongside the other costs of running it.
Two new subtotals are required: operating profit or loss, and profit or loss before financing and income taxes. Because they are required, they are never management-defined performance measures (MPMs). An adjusted measure that is an MPM is reconciled to the most directly comparable IFRS subtotal: for adjusted operating profit, that is operating profit.
| Area | What changes | Intangibles angle |
|---|---|---|
| Profit or loss categories and subtotals | Five categories; two required subtotals | Amortisation and impairment of intangibles used in the business normally reduce operating profit |
| Management-defined performance measures | Adjusted profit subtotals used in public communications are disclosed and reconciled in one note | A measure that strips out amortisation of acquired intangibles is an MPM |
| Expenses by function | If any operating expense is presented by function, totals for depreciation, amortisation, employee benefits, impairment and inventory write-downs are disclosed | Total amortisation and impairment are shown, with the amount in each line item |
| Balance sheet | Goodwill becomes a required line item | Goodwill is shown separately from other intangible assets |
| Cash flows | The indirect method starts from operating profit | The reconciliation starts from the subtotal that carries amortisation and impairment |
| Aggregation and disaggregation | Principles for grouping items and showing them separately | With the expenses-by-function note, amortisation and impairment are not lost inside wider lines |
A management-defined performance measure (MPM) is a subtotal of income and expenses used in public communications outside the financial statements to communicate management's view of an aspect of the financial performance of the entity as a whole. Measures that are not subtotals of income and expenses, such as free cash flow or a customer retention rate, are not MPMs.
Public communications include management commentary, press releases and investor presentations. They exclude oral communications, written transcripts of them, and social media posts.
IFRS 18 lists subtotals that are not MPMs, including gross profit and similar subtotals; operating profit before depreciation, amortisation and impairments within the scope of IAS 36; profit before income taxes; and profit from continuing operations. A plain operating profit before depreciation, amortisation and impairment is therefore not an MPM, but an adjusted EBITDA that also excludes share-based payments or exceptional items is. Whether a figure labelled EBITDA falls within the exclusion depends on its calculation, because EBITDA as commonly calculated may not equal the listed subtotal.
| Measure | MPM? | Why |
|---|---|---|
| Operating profit | No | A required IFRS 18 subtotal |
| Operating profit before depreciation, amortisation and IAS 36 impairments | No | A listed exclusion |
| Adjusted EBITDA excluding share-based payments and exceptional items | Yes | It adjusts beyond the listed exclusion |
| Adjusted operating profit before amortisation of acquired intangibles | Yes | A subtotal of income and expenses defined by management |
| Free cash flow | No | Not a subtotal of income and expenses |
| Customer retention rate | No | Not a subtotal of income and expenses |
The "Yes" answers assume the measure is used in public communications. For each MPM, a single note gives a statement that MPMs provide management's view and are not necessarily comparable with other companies' measures; why the measure is useful; how it is calculated; a reconciliation to the most directly comparable IFRS subtotal; and the income tax and non-controlling-interest effect of each reconciling item. Comparatives are required, and because the disclosures sit in the notes, they fall within the audit.
Where the adjusted profit measures in an equity story, investor presentation or results press release are subtotals of income and expenses, they become audited note disclosures, each reconciled to an IFRS subtotal with the tax effect of every reconciling item.
Three changes bear directly on intangible assets. First, a company presenting any operating expense by function, such as cost of sales, must disclose in a single note the totals for depreciation, amortisation, employee benefits (including share-based payment), impairment losses and reversals, and inventory write-downs, with the amount in each operating line item (our FAQ sets out the difference between amortisation and impairment). Second, goodwill gets its own balance sheet line, covered below.
Third, and most visible in an equity story, adjusted measures that strip out amortisation of acquired intangibles become MPMs. That amortisation arises from the purchase price allocation on each acquisition, and an acquisitive company may exclude it; under IFRS 18 it must explain why. Our IPO readiness checklist places this within the wider intangibles workstream, and the equity story behind your intangible assets covers how such measures support the investment case.
A value bridge, which links value drivers to the assets that produce them, helps explain what the excluded amortisation relates to. The illustration below is for a hypothetical group: all figures are illustrative, in £000, with tax effects at an illustrative 25% rate and no non-controlling interests.
| Line | Amount (£000) | Income tax effect at an illustrative 25% (£000) | Non-controlling interest effect (£000) |
|---|---|---|---|
| Operating profit (required IFRS 18 subtotal) | 4,000 | ||
| Add: amortisation of acquired intangibles | 1,500 | (375) | nil |
| Add: share-based payment expense | 500 | (125) | nil |
| Adjusted operating profit (MPM) | 6,000 | (500) | nil |
Here the group would describe adjusted operating profit as operating profit before amortisation of acquired intangibles and share-based payment, explain why it is useful, and show the same reconciliation for the comparative year.
IFRS 18 also amends IAS 7. Under the indirect method, the reconciliation of operating cash flows now starts from operating profit. Dividends paid are classified as financing. For a company without a specified main business activity, interest paid is financing, and interest and dividends received are investing.
On the balance sheet, goodwill becomes a required line item on its own, separate from intangible assets. For a company built partly through acquisitions, readers will see goodwill, the balance that goodwill impairment testing supports, as its own figure, distinct from the identified intangible assets recognised in each purchase price allocation.
Most of the work concerns measures the company already uses. Six steps put it in order.
Work out when the first IFRS reporting period begins. If it begins on or after 1 January 2027, the first IFRS statements, comparatives included, are presented under IFRS 18.
If the first IFRS reporting period begins before 1 January 2027, consider applying IFRS 18 early, so the presentation changes once rather than twice. Early application is permitted and is disclosed.
List every adjusted measure in investor presentations, press releases and management commentary. Separate subtotals of income and expenses, which may be MPMs, from measures such as free cash flow, which are not.
For each MPM, record why it is useful and exactly how it is calculated, and choose a label that matches what it excludes.
Reconcile each MPM to the most directly comparable IFRS subtotal, with the income tax and non-controlling-interest effect of each reconciling item, for the current and the comparative year.
Check that the measures in the equity story match the historical financial information and the MPM note. The long-form report in an IPO is where the reporting accountant examines the intangibles behind them.
An MPM label must match what the measure excludes. "Operating profit before non-recurring expenses" is a faithful label only if it excludes all expenses the company identifies as non-recurring, with the term explained. "Non-recurring" items that recur undermine credibility with the reporting accountant and investors.
IFRS 18 asks a company to explain what its adjusted measures exclude and why. Where the exclusions concern intangible assets, that rests on knowing what the assets are and what they contribute.
In Opagio Intangibles, the Opagio Value Drivers Register™ records the company's intangible assets, including those acquired in a business combination, with their evidence. Asset valuations from the Asset Valuator support the explanation of what an adjusted measure excludes and why, and co-branded reports bring the register and the valuations to the board.
Opagio does not prepare financial statements, MPM notes or IFRS conversions. The directors, the auditor and the reporting accountant own those.
Keep the intangible assets behind your adjusted measures, acquired and built, in one register with their evidence and valuations. Book a demo of Opagio Intangibles, or see how we support exit-ready companies.
IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027, and earlier application is permitted. The UK Endorsement Board adopted it for use in the UK on 10 December 2025. A first-time adopter whose first IFRS reporting period begins on or after 1 January 2027 applies IFRS 18 throughout, comparatives included.
Yes, where it is used in public communications and adjusts for more than depreciation, amortisation and IAS 36 impairments, for example by also excluding share-based payments or exceptional items. The plain subtotal before depreciation, amortisation and IAS 36 impairments is a listed exclusion, so whether a figure labelled EBITDA is an MPM depends on its calculation.
No. FRS 102 reporters are not affected by IFRS 18, including UK-incorporated AIM companies reporting under FRS 102, which AIM has allowed since August 2026. The standard matters once a company moves to IFRS, for example for a Main Market listing.
David Stroll is Co-Founder and Chief Scientist of Opagio, where he leads research on intangible asset accounting and productivity measurement. Learn more about our team.
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